Oregon’s public employee retirement system (more commonly referred to as “PERS”) is broken. Super broken. Each year, public entities such as cities, counties, and school districts have to pay a larger and larger portion of their budgets to pay for it. In the case of Oregon schools, more than 10 cents of every education dollar goes to fund PERS. And number-crunchers tell us that number is going to climb each year for the next 16 years; the exorbitant PERS rates will remain high from 2035 to 2045; and then PERS rates will slowly decrease (to what level no one yet seems to know).
The challenge in discussing PERS, or what to do about it, is the lack of available information to inform a reasoned discussion. Instead, the loudest and most robust voices out there discussing PERS tend to fall into one of two camps.
On one side we have the Republicans who love to demonize all public employees as lazy fat cats living on the public dole, but these same Republicans rarely, if ever, offer up solutions—just complaints. For a gross example of this, check out this op-ed recently published in the Oregonian. This is the kind of stuff you see everywhere: general complaints about out-of-control public employees with zero ideas of how to make anything better. It makes you wonder if people like this op-ed’s author are really very interested in fixing PERS since doing so would do away with their favorite punching bag?
On the other side you have Democrats who refuse to acknowledge there is even a problem, and treat critics of PERS as heartless monsters who fail to appreciate the noble work of our teachers and other vital public servants. These Democrats act as though any critic of PERS would love nothing more than to see elderly former government workers eating cat food inside a lean-to.
If a citizen wants to become informed about the PERS problem, and figure out ways of perhaps solving it, doing so is incredibly difficult because any search for information on PERS will clog one’s browser with garbage from these two camps. Let me try to cut through the noise here, and discuss just how bad the PERS problem is.
Understand that PERS presents a widespread and systemic problem. Critics of PERS point out that former University of Oregon football coach Mike Belotti receives $47,500 per month in public retirement benefits (he does) and that the former head of OHSU, Joseph Robertson, receives $77,000 per month (true). Defenders of PERS will point out that Mr. Belotti and Mr. Robertson are outliers within the system (also true).
The problem, however, is not just football coaches and OHSU presidents. There are currently 2,312 PERS recipients earning more than $100,000 a year in retirement. These 2,300 people are costing our state almost $300 million a year. To bring that to a local level, the money going to these 2,300 people (or. 005% of Oregon’s population) are costing my local school district $2.2 million per year (or 2% of our annual budget). To put it another way, this is about how much money it takes for our district to hire teachers to fill a K-5 primary school. Can anyone defend a public employee retiring at 55, living another 25 years with a $100,000-a-year pension, and thereby collecting $2.5 million in retirement benefits? Or a system where more than 20% of all PERS benefits are going to less than 2% of PERS retirees?
We also have 28,388 current PERS recipients (or 21.4% of all PERS recipients) making more in retirement than they made in their final year of salary. Many are making much more. As an example, there is a public school teacher in the Eugene area who retired from teaching in 2004. When she retired, she was earning about $53,000 a year as a teacher. In retirement, she is earning more than $138,000 a year (plus whatever she earns from the business she opened once she retired from teaching). Can anyone defend this? This is admittedly an extreme example, but there are thousands of public employees who retired making $50,000 to $60,000 a year, but collect $80,000 to $90,000 a year in retirement. Can we not acknowledge the lunacy and unsustainability of such a model? Particularly when the legislature’s initial goal was to provide lifetime government employees with pensions constituting 50 to 60 percent of a workers’ final year salary.
Many people are upset about the PERS debacle, and they should be because it was entirely avoidable. It was the PERS Board back in the 70s and 80s that set high guaranteed rates of return. This is somewhat forgivable due to the high interest rates and inflation of the time. What is not forgivable though is how prior PERS Boards acted in years when investment returns exceeded the promised rate of return. Prior PERS Boards ignored the advice of its financial advisors to place the surplus investment gain into a rainy day fund to help cover shortfalls in those inevitable years when market returns were less than the guaranteed rate of return. The PERS Board instead chose to distribute the surplus gains to existing PERS beneficiaries. This decision guaranteed future shortfalls. While an important historical footnote, and one worth learning from, I do want to concede that it’s more important to look forward for solutions rather than backwards for blame.
The meaningful conversation I’d like to see our leaders engage in is what can be done about this. Short of our state declaring bankruptcy, I don’t know that a meaningful solution exists (particularly for Tier 1 retirees). I have found a bipartisan organization called PERS Solutions for Public Services, but why aren’t our elected leaders following their lead, proposing solutions, and taking affirmative steps to make them happen? And how different would the political landscape be if HB 3427, the Student Success Act, included meaningful measures to control PERS costs? Could we have avoided the upcoming battle in November where Republicans intend to repeal the Student Success Act via a voter referendum? Or perhaps Oregon Democrats could have obtained a quorum to vote on the Student Success Act without having to give up on common sense gun legislation (SB 978 requiring guns be safely stored) and legislation requiring parents to vaccinate their children (HB 3063).
I’d sure like to hear our elected leaders in Salem have a meaningful conversation on PERS reform rather than what he have now: one side vilifying all public employees and the other side blindly defending a broken system. Again our elected leaders show us that the scarcest quality in politics is creativity. Let’s do better Oregon.
– Dylan
TheBlueBrothers 